Transglutaminase 2 (TGase 2) is one of a family of enzymes that catalyze protein modification through the incorporation of polyamines into substrates or the formation of protein crosslinks. However, the physiological roles of TGase 2 are largely unknown. To elucidate the functions of TGase 2, we have searched for its interacting proteins. Here we show that TGase 2 interacts with E7 oncoprotein of human papillomavirus type 18 (HPV18) in vitro and in vivo. TGase 2 incorporates polyamines into a conserved glutamine residue in the zinc-binding domain of HPV18 E7 protein. This modification mediates the inhibition of E7's Rb binding ability. In contrast, TGase 2 does not affect HPV16 E7, due to absence of a glutamine residue at this polyamination site. Using E7 mutants, we demonstrate that TGase 2-dependent inhibition of HPV E7 function correlates with the presence of the polyamination site. Our results indicate that TGase 2 is an important cellular interfering factor and define a novel host-virus interaction, suggesting that the inability of TGase 2 to inactivate HPV16 E7 could explain the high prevalence of HPV16 in cervical cancer.